nep-bec New Economics Papers
on Business Economics
Issue of 2007‒02‒24
27 papers chosen by
Christian Calmes
University of Quebec in Otawa

  1. Career counseling within organizations: isolation or integration? By Soens, N.; De Vos, A.
  2. Financial structure, managerial compensation and monitoring By Sonja Daltung; Vittoria Cerasi
  3. Incentives and Managerial Experience in Multi-Task Teams: Evidence from Within a Firm By Griffith, Rachel; Neely, Andrew
  4. Vintage Capital and Expectations Driven Business Cycles By Flodén, Martin
  5. Toward an integrative framework of strategies that work By Verweire, K.; Ferguson, T.; Debruyne, M.
  6. Worker's Compensation Insurance and the Duration of Workplace Injuries. By Alan B. Krueger
  7. Financial Constraints and the Costs and Benefits of Vertical Integration By Macchiavello, Rocco
  8. Agency Delayed Compensation, and the Structure of Executive Remuneration By Harvey S. Rosen; Jonathan Eaton
  9. A General Inter-Industry Relatedness Index By David Bryce; Sidney Winter
  10. Research methods in negotiation: 1965-2004 By Buelens, M.; Van De Woesteyne, M.; Steven Mestdagh; Dave Bouckenooghe
  11. Current trends in business negotiation research: An overview of articles published 1996-2005 By Agndal, Henrik
  12. Employee Participation in Management, Bargaining Power and Wages By Jan Svejnar
  13. Career Progression and Formal versus On-the-Job Training By Adda, Jerome; Dustmann, Christian; Meghir, Costas; Robin, Jean-Marc
  14. White Collar Unions, Blue Collar Unions and Wages in Manufacturing. By Daniel Hamermesh
  15. Unionism, Relative Wages, and Labor Quality in U.S. Manufacturing Industries. By Orley Ashenfelter; George Johnson
  16. Male-Female Pay Differentials in Professional Employment By Burt Malkiel; Judith; Burt Malkiel
  17. Gender and Job Performance: Evidence from Wall Street By T. Clifton Green; Narasimhan Jegadeesh; Yue Tang
  18. Changing Wage Structure and Black-White Wage Differentials: A Longitudinal Analysis By David Card; Thomas Lemieux
  19. On Current Account Surpluses and the Correction of Global Imbalances By Sebastian Edwards
  20. The gender wage gap in top corporate jobs is still there By B. Burcin Yurtoglu; Christine Zulehner
  21. Amplifying Business Cycles through Credit Constraints By Chakraborty, Suparna
  22. Union Wage Compression in a Right-to-Manage Model By Thorsten Vogel
  23. Collective Risk Management in a Flight to Quality Episode By Ricardo J. Caballero; Arvind Krishnamurthy
  24. Why Workers Want Unions: The Role of Relative Wages and Job Characteristics By Henry Farber; Daniel Saks
  25. Immediate Agreement in Interdependent Bilateral Bargaining By Björnerstedt, Jonas; Stennek, Johan
  26. Work Effort On-the-Job Screening, and Alternative Methods of Remuneration By John H. Pencavel
  27. How Close to an Auction is the Labor Market? Employee Risk Aversion, Income Uncertainty, and Optimal Labor Contracts By James N. Brown

  1. By: Soens, N.; De Vos, A.
    Abstract: The purpose of this research was to explore how organizations give shape to career counseling. The shift from lifelong employment to lifelong employability has made career counseling an important instrument in the light of assistance to individuals in their process of self reflection and outlining a career path that matches their aspirations and competencies (Bollen et al., 2006). This study aims to examine HR-practices relating to career counseling as part of the broader career management policy. Starting from existing career typologies (e.g. Baruch, 2004), we aim to explore which processes underlie the implementation of career counseling. More specifically, we investigate whether career counseling concerns an isolated process within organizational career management, or is integrated in the overall human resource management. Using a qualitative case-study approach, this study looked at 10 organizations defined as ‘best practices’ in organizational career management, based on a prior quantitative study (Bollen et al., 2006). Semi-structured interviews were held with the HR, career or talent manager of each organization in order to explore in-depth the career counseling process. Based on our findings we built a model of how different career management practices in existing typologies are integrated into a consistent approach to career counseling. Moreover, we found that the core of the career counseling process is its interrelatedness with the performance management cycle. Our findings also revealed that career counseling within organizations is a shared responsibility between HR, line management and employees. The added value of this study lies in uncovering how career management and performance management are interwoven in reality. Implications for practioners of this best practices analysis, limitations of the study and suggestions for future research are discussed.
    Date: 2007–02–14
  2. By: Sonja Daltung; Vittoria Cerasi
    Abstract: When a firm has external debt and monitoring by shareholders is essential, managerial bonuses are shown to be an optimal solution. A small managerial bonus linked to firm's performance not only reduces moral hazard between managers and shareholders, but also between creditors and monitoring shareholders. A negative relation between corporate bond yields and managerial bonuses can be predicted. Furthermore, the model shows how higher managerial pay-performance sensitivity goes hand in hand with greater company leverage and lower company diversification. These predictions find some support in the empirical literature.
    Date: 2006–11
  3. By: Griffith, Rachel; Neely, Andrew
    Abstract: This paper exploits a quasi-experimental setting to estimate the impact that a multi-dimensional group incentive scheme had on branch performance in a large distribution firm. The scheme, which is based on the Balanced Scorecard, was implemented in all branches in one division, but not in another. Branches from the second division are used as a control group. Our results suggest that the balanced scorecard had some impact, but that it varied with branch characteristics, and in particular, branches with more experienced managers were better able to respond to the new incentives.
    Keywords: balanced scorecard; incentive design; managerial experience
    JEL: J33 M12 M52
    Date: 2007–02
  4. By: Flodén, Martin
    Abstract: This paper demonstrates that increased optimism about future productivity can generate an immediate economic expansion in a neoclassical model with vintage capital and variable capacity utilization. Previous research has documented that standard neoclassical models cannot generate a simultaneous increase in consumption, investment, and hours in response to news shocks, and that optimism in these models tends to reduce investment and hours. When technology is vintage specific, however, expectations of higher future productivity raise the demand for new vintages of capital relative to installed capital. Capital depreciates faster when utilization is high, but this depreciation only affects installed capital. The cost of high depreciation therefore falls when the value of installed capital falls. It is demonstrated here that with standard parameter values, more optimism raises utilization, consumption, investment, hours, and output.
    Keywords: business cycles; capital-embodied technological change; expectations; news; vintage capital
    JEL: E13 E32
    Date: 2007–02
  5. By: Verweire, K.; Ferguson, T.; Debruyne, M.
    Abstract: Competitive strategy is at the heart of the field of strategic management. But despite years of academic research, there is a lot of debate about what constitutes competitive strategy and how effective competitive strategies lead to superior performance. In this article, we argue that strategy is about making clear choices (“focus”) and about being different (“differentiation”) on four strategic dimensions, including: Whom do we serve?, What do we provide?, What is our value proposition?, and How do we realize all this? Although recent work has pointed to these conclusions, this paper goes one step further by providing more concrete ideas as to what focus and differentiation really mean for each of the various dimensions and why they matter. As such, we provide managers a framework that can be used to test the extent to which their strategies have the potential to be effective.
    Date: 2007–02–12
  6. By: Alan B. Krueger
  7. By: Macchiavello, Rocco
    Abstract: Does vertical integration reduce or increase transaction costs with external investors? This paper analyzes an incomplete contracts model of vertical integration in which a seller and a buyer with no cash need to finance investments for production. The firm is modeled as a "nexus of contracts" across the intermediate input supply and the financing transaction. The costs and benefits of vertical integration depend on the relative importance of a positive "contractual centralization" effect against a negative "de-monitoring" effect: the firm centrally organizes the nexus of contracts reducing the extent of contractual externalities while the market disciplines decisions driven by private benefits. Larger projects, more specific assets, and low investors protection are determinants of vertical integration.
    Keywords: contractual externalities; investors protection; limited liability; theory of the firm; vertical integration
    JEL: D23 G32 K12 L22 O10
    Date: 2007–02
  8. By: Harvey S. Rosen; Jonathan Eaton
  9. By: David Bryce; Sidney Winter
    Abstract: Firm growth and expansion is widely believed to be guided by the desire to leverage existing resources. But which resources? The answer depends largely on context.the peculiarities of industries, firms, technologies, production, customers, and a host of other dimensions. This fact makes pointing to any particular set of resources as the source of expansion decisions potentially problematic and makes more difficult tests of theories such as the resource-based view of the firm. This paper tackles the problem by developing a general inter-industry relatedness index that can be usefully applied across industry and firm contexts. The index harnesses the relatedness information embedded in the multi-product organization and diversification decisions of every firm in the US manufacturing economy. The index is general in that it implicitly varies the underlying resources upon which expansion proceeds with the industries in question and provides a percentile relatedness rank for every possible pair of fourdigit SIC manufacturing industries. The general index is tested for predictive validity and found to perform as expected. Applications of the index in strategy research are suggested.
    Date: 2006–12
  10. By: Buelens, M.; Van De Woesteyne, M.; Steven Mestdagh; Dave Bouckenooghe
    Abstract: This study provides insight into the dominant methodological practices that have shaped the field of negotiation over the past four decades, and sheds light on possible gaps and trade-offs. We content analyzed 941 peer reviewed negotiation articles (published between 1965-2004) for methodology. We distinguished key issues in negotiation research and identified methodological trends over time (1965-2004). The results reveal significant changes in reliability, validity and triangulation issues. In addition, the rise of multivariate statistics and multiple data-sources displays a positive evolution towards more sophisticated methodologies. However, more attention is needed to address the enduring lack of longitudinal designs and qualitative techniques in negotiation research.
    Keywords: negotiation; research methodology; review; validity; triangulation
    Date: 2007–02–12
  11. By: Agndal, Henrik (Dept. of Business Administration, Stockholm School of Economics)
    Abstract: This report presents an overview of 263 articles dealing with business negotiations. Firstly, some general trends in business negotiation research are identified. Secondly, a number of research topics are discussed in greater detail, based on a model of negotiation research. This model focuses on the negotiating parties, the context in which the negotiation takes place, the negotiation process, and outcomes of negotiations. Third, some suggestions for future research are presented.
    Keywords: negotiation; bargaining
    Date: 2007–02–07
  12. By: Jan Svejnar
  13. By: Adda, Jerome; Dustmann, Christian; Meghir, Costas; Robin, Jean-Marc
    Abstract: We develop a dynamic discrete choice model of training choice, employment and wage growth, allowing for job mobility, in a world where wages depend on firm-worker matches, as well as experience and tenure and jobs take time to locate. We estimate this model on a large administrative panel data set which traces labour market transitions, mobility across firms and wages from the end of statutory schooling. We use the model to evaluate the life-cycle return to apprenticeship training and find that on average the costs outweigh the benefits; however for those who choose to train the returns are positive. We then use our model to consider the long-term lifecycle effects of two reforms: One is the introduction of an Earned Income Tax Credit in Germany, and the other is a reform to Unemployment Insurance. In both reforms we find very significant impacts of the policy on training choices and on the value of realised matches, demonstrating the importance of considering such longer term implications.
    Keywords: administrative data; apprenticeship; dynamic discrete choice; education; job mobility; job search; labour supply; matching; tax credits
    JEL: I2 J6
    Date: 2007–02
  14. By: Daniel Hamermesh
  15. By: Orley Ashenfelter; George Johnson
  16. By: Burt Malkiel; Judith; Burt Malkiel
  17. By: T. Clifton Green; Narasimhan Jegadeesh; Yue Tang
    Abstract: We study the relation between gender and job performance among brokerage firm equity analysts. Women's representation in analyst positions drops from 16% in 1995 to 13% in 2005. We find women cover roughly 9 stocks on average compared to 10 for men. Women's earnings estimates tend to be less accurate. After controlling for forecast characteristics, the difference in accuracy is roughly equivalent to four years of experience. Despite reduced coverage and lower forecast accuracy, we find women are significantly more likely to be designated as All-Stars, which suggests they outperform at other aspects of the job such as client service.
    JEL: G14 G29 J44 J7
    Date: 2007–02
  18. By: David Card; Thomas Lemieux
  19. By: Sebastian Edwards
    Abstract: In this paper I analyze the nature of external adjustments in current account surplus countries. I ask whether a realignment of world growth rates -- with Japan and Europe growing faster, and the U.S. growing more slowly -- is likely to solve the current situation of global imbalances. The main findings may be summarized as follows: (a) There is an important asymmetry between current account deficits and surpluses. (b) Large surpluses exhibit little persistence through time. (c) Large and abrupt reductions in surpluses are a rare phenomenon. (d) A decline in GDP growth, relative to long term trend, of 1 percentage point results in an improvement in the current account balance -- higher surplus or lower deficit -- of one quarter of a percentage point of GDP. Taken together, these results indicate that a realignment of global growth -- with Japan and the Euro Zone growing faster, and the U.S. moderating its growth -- would only make a modest contribution towards the resolution of global imbalances. This means that, even if there is a realignment of global growth, the world is likely to need significant exchange rate movements. This analysis also suggests that a reduction in China's (very) large surplus will be needed if global imbalances are to be resolved.
    JEL: F02 F31 F32
    Date: 2007–02
  20. By: B. Burcin Yurtoglu; Christine Zulehner
    Abstract: We investigate the gender wage gap in top corporate jobs for the years 2000 till 2004. Using data from the OSIRIS database, we ¯nd that female managers receive 24.0 percent less in total compensation (salary, bonuses, other payments and exer- cised stock options) than their male colleagues. When we control for personal, ¯rm and industry characteristics, this di®erence reduces to 15.9 percent. Controlling for occupational segregation, i.e. \glass ceiling", reduces the di®erence to 6.0 percent. Additional results that fully consider the role of stock option indicate a 9.0 to 12.1 percent di®erence. These results suggest that the main sources of the gender wage gap in top corporate jobs are occupational segregation and a di®erent endowment of male and female managers with stock options.
    JEL: J31 G3
    Date: 2007–01
  21. By: Chakraborty, Suparna
    Abstract: Theory suggests that endogenous borrowing constraints amplify the impact of external shocks on the economy. How big is the amplification? In this paper, we quantitatively investigate this question in the context of a dynamic general equilibrium model with borrowing constraints under two alternatives: (1) borrowing constraint endogenously depends on the borrower's net worth (2) borrowing constraint is exogenous. Calibrating our model to the Japanese economy, we find evidence of significant amplification in our impulse responses. Quantitatively applying the model to the Japanese case, we find TFP can significantly account for the Japanese business cycle during the period 1980 to 2000 and the impact is much amplified when we assume that borrowing constraints are endogenously determined.
    Keywords: Borrowing constraint; Endogenous; Net worth; Business cycle; Amplification
    JEL: E32
    Date: 2006–12–11
  22. By: Thorsten Vogel
    Abstract: Trade unions are consistently found to compress the wage distribution. Moreover, unemployment affects in particular low-skilled workers. The present paper argues that an extended Right-to-Manage model can account for both of these findings. In this model unions compress the wage distribution by raising wages of workers in low productivity industries (or low-skilled workers) above market clearing levels. Our analysis suggests that the most direct way to test this model would be via a test for stochastic dominance. We also allow for capital adjustments and compare union and non-union wage distributions in a general equilibrium framework.
    Keywords: Trade unions, wage compression.
    JEL: J51 J31 J41 J21
    Date: 2007–02
  23. By: Ricardo J. Caballero; Arvind Krishnamurthy
    Abstract: We present a model of optimal intervention in a flight to quality episode. The reason for intervention stems from a collective bias in agents' expectations. Agents in the model make risk management decisions with incomplete knowledge. They understand their own shocks, but are uncertain of how correlated their shocks are with systemwide shocks, treating the latter uncertainty as Knightian. We show that when aggregate liquidity is low, an increase in uncertainty leads agents to a series of protective actions -- decreasing risk exposures, hoarding liquidity, locking-up capital -- that reflect a flight to quality. However, the conservative actions of agents leave the aggregate economy over-exposed to negative shocks. Each agent covers himself against his own worst-case scenario, but the scenario that the collective of agents are guarding against is impossible. A lender of last resort, even if less knowledgeable than private agents about individual shocks, does not suffer from this collective bias and finds that pledging intervention in extreme events is valuable. The intervention unlocks private capital markets.
    JEL: E30 E44 E5 F34 G1 G21 G22 G28
    Date: 2007–02
  24. By: Henry Farber; Daniel Saks
  25. By: Björnerstedt, Jonas (Swedish Competition Authority); Stennek, Johan (Research Institute of Industrial Economics)
    Abstract: This note provides sufficient conditions for immediate agreement in an extensive form model of interdependent bilateral bargaining. The model is suggested by Björnerstedt and Stennek (2006) as a work horse for studying bilateral oligopoly. The key feature of this model is that the firms are represented by separate agents in all negotiations in which they are involved. There is immediate agreement in equilibrium, essentially if production is strictly convex or if the agents use Markov strategies.
    Keywords: Bilateral Oligopoly; Intermediate Goods; Bargaining; Market Network; Trade Link
    JEL: C70 D20 D40 L10 L40
    Date: 2007–01–25
  26. By: John H. Pencavel
  27. By: James N. Brown

This nep-bec issue is ©2007 by Christian Calmes. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.